Millionaire TradersQ: Obviously biotech was one sector that you would just stay
away from, but has there been a time when a stock crashed, you’ve
read the news releases as to what caused the crash, and the news
made you say, “You know what, I don’t want to touch this, this is
just too toxic”?
A: Yes. Like if they cooked the books or someone’s been arrested.
The crashes I like best are when the earnings are good but the stock
collapses.
Q: That’s a very interesting trade. So you actually like it when
you have a positive fundamental surprise, but a negative price
movement and there’s a disconnect between the fundamentals
and what the price is doing?
A: Yes, my favorite. Because people are just selling out of fear,
there’s no real reason for it. They say, “Gee, it should be going up,
it’s going down, I’m getting out.” You know.
Q: There’s one unifying theme that tends to run through all of
your trading, be it specs in options or be it swing trading or even
intraday trading—you are most comfortable with a value based
trade. You like to buy value cheap, whether it be on an intraday
basis, swing basis, or even speculative basis and then see it rally.
A: For long term that’s 100 percent correct. One such trade I did
was in 2003. At that point we’d had a real crash just like with the
‘29 crash, very similar, and then I remembered an oldWall Street
Weekepisode, John Templeton was on and he said when he started
out during World War Two, he took all the$1 stocks and bought
every$1 stock on the stock exchange. So that triggered a memory
as we just had a real similar market crash—worst one since 1929.
I decided to modify it a little bit to look for companies with no
debt. I had two criteria: One that it really had to be a good growing
company, at a good value, or it used to be a decent$20 to$40 stock